Reading a typical biotech press release is kind of like listening to a sugar-high kid gush about the latest superhero blockbuster. They tend to be breathless, bursting with buzz words like “groundbreaking” and “game-changing”—you’d think that every company was on the verge of unveiling the next penicillin.
Granted, it makes sense that firms want to promote their technology platforms, drug candidates, and clinical trial results. But all that hype in a highly technical, jargon-drenched, and often esoteric industry can put lay investors in a bind.
Short of becoming an expert in drug development and heading to industry conventions such as the American Society of Clinical Oncology’s (ASCO) annual cancer meeting—like self-described independent biotech investor Brad Loncar does—your average Joe probably can’t tell whether an individual biotech company is peddling snake oil or the heir to Sovaldi (Gilead’s (GILD) legitimately groundbreaking hepatitis C cure).
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The problem, Loncar explained to Fortune in an interview at ASCO earlier this month, is that even diversified, less risky ETFs and indices like the NASDAQ Biotechnology Index (NBI) may not be the most effective way to invest in the field. After all, “biotech” is a pretty broad category that encompasses everything from next-gen cancer therapy makers that are already on the market and racking up sales to firms that are still years away from even filing for their first FDA approval.
So, Loncar took matters into his own hands and created a new type of biotech index that focuses exclusively on the red-hot field of cancer immunotherapy drugs (treatments which use the body’s immune system as a conduit to fight cancer). “I would venture to guess that probably 90% of people missed out on this kind of revolution that’s going on in biotech right now,” he said.
Loncar’s fund, the Loncar Cancer Immunotherapy ETF, trades on the NASDAQ under the ticker CNCR and launched last fall. “The idea here was to create something that made it easy for people to focus on this one area that I think is the most innovative, high-growth area in the biotech space,” he explained. This allows investors to place their bets on “the theme of immunotherapy itself rather than trying to do all that risky stock-picking” while also homing in on a therapeutic space that can achieve tangible results.
Immuno-oncolocy has been the focus of Big Pharma and biotechs alike, with companies such as Merck (MRK), Bristol-Myers Squibb (BMY), Pfizer (PFE), Roche/Genentech, Juno (JUNO), Kite Pharma (KITE), Novartis (NVS), and countless others pouring massive investments into the space (the Loncar ETF contains almost all of these companies). Bristol-Myers’ next-generation immunotherapy drug, Opdivo, is well on its way to garnering more than $1 billion in yearly sales while extending cancer patients’ lives.
Read all of Fortune’s coverage of ASCO and the most promising new cancer drugs and technology.
But does Loncar think he can apply this same investing method to other parts of biotech? “Yeah, I do,” he said. “This is a brand new fund that just launched in October and so we’re still trying to learn if it’s going to be a success or not. It’s been a great launch so far, but it’s too soon to tell. If it is successful, we do have plans for more funds.”
Loncar declined to expand on which drug development arenas might make for compelling funds, citing competitive concerns. But he compared his project to the stratification of technology stocks, which span a number of discrete sectors rather than one homogenous whole. “The reality of biotech is the same, so I could definitely see myself choosing what I think are the top three or four or five most high-growth, innovative sectors and focusing on that,” said Loncar.
Biotech stocks, including many included in Loncar’s fund, have not been having the greatest year. The NBI is down more than 21% year-to-date; the Loncar ETF isn’t doing much better, down about 20% so far in 2016.
But Loncar is broadly optimistic about the market’s future despite the recent volatility. He thinks the harsh, critical rhetoric about biopharma will die down as the presidential election approaches, and that currently skittish investors will jump into the fray.
“If the sector has a bright future, like I think it does, my guess is the rebound will get started faster and before the election because the stock market is theoretically forward-looking,” he said.
